AMM Comment: Steel industry should be embracing IT advances

This months issue offers a story on controlling risk in the aluminum sector. The use of information technology (IT) for budgeting, forecasting and other financial-related aspects of running a metals business are an important part of that approach. Aluminum firms are to be commended for their foresight here.

But as a report in the February issue outlined, by all accounts the global steel industry has lagged behind in the adoption of enterprise-wide ITnot just compared with the service sector or discrete manufacturing, but even when compared with other metals, oil and chemicals. The steel sector needs to fully embrace available IT solutions for a range of practices, processes and performances. If it does not, it risks being left behind by competing materials and businesses in the global race to be the metal of the future.

In its defense, the industry will often argue that it has infinite grades and types, and that it has an inherently much more complicated manufacturing process and supply chain. Steelmakers also have argued that the investments required to upgrade to state-of-the-art IT solutions are high for an industry that has sometimes struggled with the bottom line during the recent downturn. These are not unreasonable points, but ultimately they will become self-defeating rationalizations if a different attitude is not adopted.

Many industry analysts and observers say the challenge is not the technology, but the mentality of management. As one expert has pointed out, systems can be very elegant, but if they come out of the engineering-driven culture they may not be able to solve problems and show returns. Every solution is not the best one; it also has to prove it can be effective. But if top management has the philosophy that the market comes to them regardless, then they are going to have a hard time seeing the value in any new system.

Industry analysts point out that the advantages of better datareal-time dataenabling better decision-making are starting to be realized, but for whatever reason metals do lag comparable industries. Those who act now still have time to gain an edge over competitors and other industries. But that might only be possible if steel companies seriously consider the possibility that now might be the right time to invest in these solutions. A few companies do come in for praise, Luxembourgs ArcelorMittal SA, Brazils Gerdau SA and Luxembourgs Tenaris SA among them. But more steelmakersespecially U.S.-based companiesneed to embrace the future now.

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